Page 11 - Finac2 Test 1 Slides - 3. Intra-Group Transactions

CONSOLIDATIONS AFTER THE DATE OF ACQUISITION

Inventories

Unrealised profit in opening inventory

• When the consolidation is performed at the end of the year, the

consolidation journals which were recorded during the previous
year’s consolidation, will not be reflected in the financial

statements.

• Remember that consolidation journals are pro forma journals and

are only done in the consolidation working papers; they are not

actually processed through the accounting system.

• The current year’s opening inventory will not agree with the

previous year’s closing inventory because the unrealised profit was
eliminated from the closing inventory of the previous year, but not

from the opening inventory of the current year. The unrealised

profit must be eliminated from the opening inventory so that it will

agree with the closing inventory of the previous year

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